Strategy before Systems
Online shopping is going from one peak to the other. And online grocery?companies are acing it.
From what was once pretty unorganized to 'customer-wise order packing' and fast deliveries today, online grocery has come a long way. And there’s change happening every day. India’s online grocery market is slated to double every two years (or earlier). Currently, it stands somewhere close to INR 25K crores and is growing faster than earlier estimates due to the pandemic.
The Indian customer has also tried and understood ‘what’s in store' for them in terms of what quality to expect (we Indians are so choosy about grocery!), and what to order (we know our grocery price by the heart) and what to skip.?From 'fresh produce' to ‘dairy' to 'snacks and beverages' to 'cooking essentials' and even 'meat and seafood', the Indian customers are now buying-trying everything online.
And many new start-ups are booming in this lucrative field. But are they making any profits? Or is everyone just believing in the Indian start-up formula will eventually succeed - bleed and?bleed until one day you become profitable! (A notion that exists with both founders and investors in India)
Each small online grocery business starts with 'manual labour for sorting and packaging', 'few or non-existent processes', and are primarily focused on 'getting orders’ and 'fast deliveries'.
Most founders are always thinking about ramping revenues first and investing in systems and technology, a little later.
The thought of ‘strategy first’ is rare, and at most strategic thinking is about investing in systems and automation.
Before ‘systems' comes ‘strategy’. Invest in ’strategy’ before you invest in anything else.
Unfortunately, ‘strategy' is something that most founders (and matured organizations alike) pass off as their core strength and believe they don’t need a dedicated strategy team / any external help or guidance. Even systems (including warehousing and fulfillment) need a strategic approach. Automation alone cannot be a problem solver!
Lack of clearly defined strategy in online grocery retail is the root cause of poor or stagnant profit outcomes.
Every online grocery business needs a professional strategist leader and two team that focusses on separate aspects -
When asked most say that they already have such teams! Strategy is not everyday tactic but most business leaders think this way.
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Successful e-grocery businesses have a clearly defined strategy, which encapsulates both short-term fixes and long-term profitability.
One must begin with ‘Tactics' and move to ‘Strategy' and further move to ‘Vision' and eventually to ‘Evolution’.
But just staying put with ’Tactics’ wouldn’t take your online grocery business anywhere. And, this seems to be the problem with most new e-grocery businesses.
Strategy for an e-grocery business should emanate from 'unfulfilled customer need’ or a void for 'an already successful business model' in a particular market (also termed as first-mover advantage, and doesn’t necessarily have to be an original idea).
The three steps required here are - Diagnosis, Solution, and Action.
‘Diagnosis’ example could be - "all competition e-grocery delivers next day”, and solution and action can likely follow.
The next step is to set a strategy map consisting of defining customers and putting financials in place to cater to these customers. This would form the set of strategic initiatives for the business. Next comes ‘metrics’ (benchmarks, targets, thresholds) and their validation (extremely important to test these)
Finally, e-grocers should arrive at a ‘budget’ to achieve the above strategy.
Obviously, promotions, communication and daily wastage of perishable items will weigh down revenues initially, so walk wisely on these. Ensure that you are always focussed on differentiation from the competition. ‘Personalisation’ of many kinds (service, product, communication, choice, etc) will be the key to differentiation.
With all the above in mind, run for a while for real validation of the ‘strategy document', and definitely use tactics to keep focussing on long-term strategy.
Once, you are certain and things look to be moving in a specific direction, you may begin to invest in systems and automation.
Happy e-selling!
Let me know if you need my help in formulating a strategy for your e-grocery business.